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| Development NPV10 with Varying Gas Price / Source: Upstream Analytics © GlobalData |
The proposed Eastern Mediterranean Natural Gas (EastMed) pipeline spans 1,300 kilometers (km) (808 miles (mi)) offshore and 600 km (373 mi) onshore, starts in Israel and has exit points in Cyprus, Crete and Greece.
The pipeline, proposed by IGI Poseidon, a 50:50 joint venture by DEPA and Edison, has a planned capacity of 1.2 to 1.5 billion cubic feet per day (bcfd). Both companies benefit from additional gas volumes to distribute to end-users.
The yet to be sanctioned Aphrodite field in Cyprus and the Phase 1B development of the Leviathan gas field in Israel are two projects in the region that would benefit from the development of the EastMed pipeline as they are highly contingent on securing an export gas market. If sanctioned, both projects are estimated to generate significant revenue for both the licensees and the states.
The Leviathan Phase 1B development would increase the Leviathan field’s development net present value (NPV) by around $607.6m if sanctioned, at the assumed pipeline tariff of $1.50 per thousand cubic feet (mcf) of natural gas.
At the same assumed pipeline tariff, the Aphrodite field has a development NPV of $1.9bn. The field has an internal rate of return (IRR) of 22.%, a payback period of eight years and four months and a DPI of 1.9.
The pipeline, proposed by IGI Poseidon, a 50:50 joint venture by DEPA and Edison, has a planned capacity of 1.2 to 1.5 billion cubic feet per day (bcfd). Both companies benefit from additional gas volumes to distribute to end-users.
The yet to be sanctioned Aphrodite field in Cyprus and the Phase 1B development of the Leviathan gas field in Israel are two projects in the region that would benefit from the development of the EastMed pipeline as they are highly contingent on securing an export gas market. If sanctioned, both projects are estimated to generate significant revenue for both the licensees and the states.
The Leviathan Phase 1B development would increase the Leviathan field’s development net present value (NPV) by around $607.6m if sanctioned, at the assumed pipeline tariff of $1.50 per thousand cubic feet (mcf) of natural gas.
At the same assumed pipeline tariff, the Aphrodite field has a development NPV of $1.9bn. The field has an internal rate of return (IRR) of 22.%, a payback period of eight years and four months and a DPI of 1.9.
Under the base assumption of a $1.50 per mcf pipeline tariff, the combined Leviathan Phase 1A and 1B projects have a break even gas price of $2.64 per mcf, compared to a $4.50 per mcf for the Aphrodite field.
At this tariff, the EastMed pipeline has an estimated payback period of 10 years based on an average annual throughput of 1.34 bcfd and without any fiscal incentives.
Beyond project economics, enabling the development of the Aphrodite field also boasts additional benefits such improving Cyprus’ energy independence and opening the possibility of further upstream developments and investment in the country. Development of the second phase of Leviathan also boosts the importance of the Eastern Mediterranean basin as gas supply hub and a critical link in European energy dynamics.
